From saving to paying off your debts — how to fix your finances in 2021


MAKE 2021 the year you get your finances in order.

Last year was tough for even the most thrifty – and overspending at Christmas will have left many panicking.

2021 is the year to get your finances in order

Money expert Warren Shute says whatever your situation, it’s time to give your money a New Year’s reboot.

The expert said: “The effects of 2020 have been polarising. Some have been able to save money by not commuting or going out as much.

“Others are struggling with reduced or even no income after the impact of lockdowns. Whatever your situation, January always brings a natural opportunity to look at things afresh.”

From starting savings to paying off your debts, Warren shares five money resolutions to make, with tips on how to keep them.

Warren Shute is author of best-selling personal finance book The Money Plan
  • Warren Shute is author of best-selling personal finance book The Money Plan. He shares his tips and free resources at

RESOLUTION 1: Choose your goals

YOU have to start by having a vision for what needs to happen to make 2021 great.

How to choose your goals: Set specific, measurable, achievable and compatible goals — many people ask too much of themselves.

Have a vision for what needs to happen to make 2021 great

Specific: With clarity comes power — the better we know something, the more confident we are in it.

Instead of thinking: “I’m going to sort out my finances this year,” try: “I will organise direct debits for regular payments and set myself a weekly spending budget.”

Measurable: You have to be able to track your achieve- ments. Simply saying: “I will save some money,” is neither specific nor measurable. “I will save £1,000 into Premium Bonds” is both. As a result, it is motivating too.

Achievable: Mindset plays a huge part in making positive financial changes. Set yourself up for failure and you will quickly give up. Momentum builds confidence and confidence builds success.

Start by setting realistic, short-term goals to build your con- fidence, then go from there.

You should have a 50/50 chance of achieving the goals you set.

Compatible: For me, the most important part. You’ve got to set goals that align with how you want to live your life and how you see yourself.

If your goals are compatible with your values, your actions are more effortless, and the whole process of change is a little more natural.

How to keep this resolution: Once you’ve set your New Year’s finance resolutions, check in on your progress after, say, 30 or 90 days.

Like the joke about eating an elephant, achieving them is about taking one bite at a time.

RESOLUTION 2: Get organised

NOW you know what you want to achieve, it’s time to assess your current situation. For this you may need to study some bank statements.

How to assess your income, assets and debts:

Assess your current financial situation

Income: What do you have coming in? Earnings, salary, any interest or benefits you receive, any loan payments or grants you are owed.

Expenditure: List every one of your monthly and annual expenses and ask yourself three small questions that add up to a huge impact: Do I need this?

Do I want this? Can I get the same for less elsewhere?

If it sounds simple, it’s because it is, but you’ll be amazed by the power those three queries hold.

Most people don’t think about how much they pay for gym membership, TV subscriptions or electricity, those payments just happen.

Assets: What do you own? Think about the value of any property you have, for help, go online. Include pension funds, bank accounts, ISAs, Premium Bonds and any-thing you’re owed by others.

Debts: What do you owe? List credit cards, overdrafts, loans, car finance and mortgages and find out the interest rates on those items.

You may be able to reduce them, which saves money without changing anything in your life. There are some great comparison sites out there to help.

How to keep this resolution: As you did with your goals, set a time to review this on an ongoing basis.

Every 90 days is normally enough, but if you need that extra support, try doing this monthly until you get more confidence.

If you want to win at the game of money, it’s not likely to happen by accident, you will need to schedule time and work on it.

RESOLUTION 3: Create a system

WE are emotional beings and that impacts what we do with our cash.

It can make a huge difference if you try to automate as much of your money management as possible, while retaining the ability to have spontaneous fun.

Make yourself a weekly Walk About Money fund for variable spending

Follow my five easy steps.

How to set up a bank account system

  1. Set up two accounts, one for bills and another for personal spending.
  2. Arrange ALL your regular payments to come out of your bills account, from your utilities to insurances to childcare.
  3. Put some WAM into your life — your weekly Walk About Money, which pays for all your variable spending, such as groceries, drinks, haircuts etc.
    Work out how much you need (or have left) to spend in a month after your bills, and divide it by four — that’s your weekly WAM.
  4. Set up a payment every Wednesday for this amount from your bills account to your spending account. Why Wednesday? It’s not too long to wait after the weekend.
  5. Your WAM is your allowance, it is finite. DON’T dip into your bills account for more. It’s not too long to wait until next Wednesday.

How to keep this resolution: This system gives you boundaries that stop you overstretching.

If you can’t afford something, save a little of your Walk About Money — your WAM — each week until you can.

RESOLUTION 4: Snowball debt

IF clearing debt is on your New Year radar, I recommend a different way to most.

Pay off your debts one by one, starting with the smallest. Typically, people with debts try to pay off the one with the highest interest rate first — but if that one also has the largest balance, it will take you a long time to pay it off and you’ll lose momentum. Psychologically, this is much harder.

How to snowball your debt: On a spreadsheet, list information for each credit card or loan you have, the amount, the minimum monthly payment and the interest rate.

You can download a free template at

Next, try to get the best interest rate you can with each provider.

Call them and see if they can reduce the rate you are paying, especially if you are having trouble making repayments.

Once you’ve got your spreadsheet, arrange your debts in order, from smallest balance first to largest balance last — NOT in order of interest rate.

For each debt, set up a direct debit, from your Bills Account, to pay off the minimum amount every month, to make sure you’re not incurring any extra fees.

To attack your debt, you pay your snowball — the surplus money you have left over each month — on to the smallest balance first.

Your aim is to rapidly and aggressively do whatever it takes to pay off that smallest debt.

Why? To get a quick win. You will start feeling good and like you’re making progress.

How to keep this resolution: Once your smallest balance is gone, congratulate yourself — you’ve achieved something great.

Repeat this and you’ll get rid of your debts one by one, each time feeling that little bit more free.

Momentum is huge in our decision-making and the Snowball System continuously builds it.

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